How Nigerian Oilman Igho Charles Sanomi II Built A Commodities Trading Giant
As we sit down for dinner in downtown Dubai, Nigerian oilman Igho Sanomi is upbeat. Alternating between sips of water and bits of mixed nuts he picks out of an espresso-sized nut cup, Sanomi is telling jokes at the table to a dozen guests, mostly his own employees. He then continues to engage, in very interesting conversations about his views, on a number of subjects during dinner.
He is renowned for pushing his limits, and he has parlayed this single attribute to stunning effect; growing Taleveras into one of the largest physical commodities trading companies in Africa in just over a decade, while remaining one of the most mysterious and storied figures in Nigerian business.
Igho Sanomi, 41, is the founder of Taleveras, a $2 billion (revenues) international commodities trading company active over a wide spectrum of global energy markets including crude oil and refined petroleum products, natural gas and power. Taleveras’ trading arm, now based in Dubai and Abuja, is one of the largest independent energy traders in Africa, with additional offices spread across West Africa, Europe and Asia. The company at its prime moved more than 170 million barrels of crude and oil products annually, and has upstream and downstream assets in a number of African countries.
Taleveras as it is today finds its earliest beginnings in 1998. Considering the high barriers to entry in Nigeria’s oil and gas sector, it seems unlikely that a 23-year-old would break in. Yet that’s exactly what Sanomi did.
While in his final year studying geology and mining at the University of Jos in Nigeria, Sanomi became fascinated with the oil industry. At the time there was a local physical oil trading company called First Fuels which had an internship program for undergraduates, and Sanomi had a colleague who worked for the firm.
“That’s where my interest was piqued,” Sanomi says. “This friend of mine went to work for First Fuels and he would come back and brag about all the things he was learning about: oil prices, fixing ships, hedging, taking positions and all that stuff. Over time he made the whole business so exciting that the allure of physical trading was too powerful for me to resist. So while most of my colleagues were dreaming of joining ExxonMobil or Shell and the other oil majors after school to work as engineers and geologists and all that stuff, I was more fascinated by the prospects of trading.”
In his final year at the university, Sanomi started reading everything he could find about physical oil trading, and he looked for an opening to get into the business. He soon found one. At the time it was popular for local Nigerian businessmen to bid for fuel import contracts from the state-owned oil company, and then upon winning the contracts, they resold the contracts to foreign oil trading companies for a tidy sum – without lifting a finger. Very few local business people wanted to do the dirty work. This is where Sanomi saw opportunity. He began looking for some of the businessmen who won those contracts and offered them a deal they couldn’t refuse.
“I offered them a joint venture. I basically told them that if you hand me this contract, I’ll fulfill it for you and you can maximize your profits. I wanted to learn the business and know the entire workings of the oil trading world, and they were impressed,” Sanomi says.
A couple of people gave Sanomi a chance. With these contracts, Sanomi approached a friend who was working with Masefield, a mid-sized Swiss trading company and made them an offer – he would source these contracts from local Nigerian businessmen and he would in turn give the contracts to the Swiss trading firm to fulfill them.
“So we did this test run and it worked. Of course, at the end of everything I got the least share of profits, and that was okay because Masefield was doing much of the heavy lifting – financing the contracts, chartering the ships and everything else. But apart from the profits, these guys were generous with their knowledge. I wanted to get an understanding of the oil and gas industry from a downstream trading perspective, and they gave me a thorough understanding of the entire business- from hedging, risk management, shipping and everything else. After a couple of structured deals like this, I went into a long-term venture with Masefield around 1998-99,” Sanomi recalls.
Several months into the partnership the CEO of Masefield made Sanomi a job offer. The terms were generous, but he had decided to take a different path. He wanted to start his own company. For the period he worked with Masefield he had learned the ropes of the trading business and was ready to handle some contracts by himself. He had established good contacts with international banks and built relationships with shipping companies. He also had a bit of savings from the profit share he had earned from his joint venture transactions. Sanomi put together a small team and opened his own shop, Sarian Oil.
“We started quite small with a line of credit that could allow us do business at the time, but we utilized it well by turning over transactions that were straightforward in terms of performance, back-to-back. So for example, you have a contract that you need to export or import a cargo of gasoline, what happens is that the banks don’t want to take any risk on you particularly because you are just starting so you need to have a confirmed off taker like a refinery or something where you are selling to so they can see the clear line of how the business will start and end,” he says.
As time went on, Sanomi and his team developed the expertise and learned how to manage their risk. They began to handle multiple transactions at the same time, and earned the confidence of the banks. Now, instead of insisting on back-to-back transactions, the banks gave Sanomi’s company some sort of flexibility whereby it could take positions, load the oil and actually look for a market for the oil. At that time, in late 1990’s- early 2000, this was rare for an African-owned company to achieve.
Sanomi and his team built the business gradually and before long he was able to win the confidence of financial institutions and shipping companies.
“Everyone starts on a back-to-back basis, and you want to build it up to where you’ve built up the strength of your balance sheet and you have more confidence with the banks to support you to take other positions. In trading the key thing is to be able to look at your options – on the purchase side, you tie it up. On the sales side, you want to hedge your risk or your exposure and have the opportunity to look at the various markets to see where you can optimize your physical position,” Sanomi explains.
“We built a very good success story where we were one of the preferred options for people who had those contracts to actually give to us to off take. Our numbers were better because we were dealing directly with the refineries in terms of the off take and we became very aggressive. Our drive wasn’t just the margins, but to prove to people that we could do it as a Nigerian company. That we could actually build something here for other people. Taleveras basically built its business to this point on the back of third party contracts. From 2004, running to couple of years down the line, Taleveras also became the preferred supplier of fuel oil feedstock to major USA refiners, we also had an exclusive joint venture with Morgan Stanley’s trading arm for crude supply to one of their refineries, we succeeded in building a well-respected brand which encouraged many young Nigerian entrepreneurs to follow the same path and build their own businesses. The international trading companies didn’t like us for this, and as a result we became a target.”In 2004, at the age of 28, Igho Sanomi merged various segments of his trading business and renamed the company Taleveras. While the company had been in operation for many years, it was circa 2008 that the company began to appear on the radar of most Nigerians, when it claims that its offshore trading arm hit a turnover exceeding $2 billion. Taleveras was frequently in the news; winning two oil blocks in 2005 during the oil bidding round organized by the Ministry of Petroleum Resources. Then followed a crude swap arrangement with Duke Oil Incorporated a subsidiary of NNPC, of which Taleveras was also a beneficiary.
In 2013 Taleveras acquired a stake in the 900MW Afam Power plant in Rivers State in Nigeria’s Southern region. Subsequently, in 2014, Taleveras invested a minority stake in the Aiteo Consortium that acquired the prolific OML 29 from Shell.
Igho Sanomi and his company were frequently in the news and pundits wondered where he had come from. Local media was rife with reports that he had enjoyed sweetheart deals from the Goodluck Jonathan-led administration and powerful forces within Nigeria’s Ministry of Petroleum. Igho Sanomi vehemently denies this was the case.
“The government of former Nigerian President Goodluck Jonathan had a big focus on local content development in the oil and gas industry. Local companies that had the capacity to engage in the oil sector were strongly encouraged to participate to bid for government tenders. In April 22, 2010 the Local Content Act became law. In the case of the crude oil term contracts, the state-owned oil company put out an advertisement. Taleveras met the criteria on a standalone basis because we had the track record and the balance sheet that met the NNPC’s requirements and we won. Same with the crude swap agreement.”
Sanomi added he has never improperly obtained any contracts.
“What most people don’t realize is that we were doing much better prior to Jonathan’s government in terms of our profitability and our peace of mind. We were trading internationally and making exceptional returns. In 2008, way before Goodluck Jonathan became president, Taleveras had annual revenues of $2 billion. The figures are there, well documented and audited. We had built a successful trading business on the back of our third-party transactions prior to 2010. But we didn’t go to stand on top of mountains to announce that. It wasn’t just our style.”
In January 2017, when the NNPC announced the successful bidders for the 2017/2018 crude oil term contracts, Taleveras’ name was nowhere to be found on the list. While pundits are quick to say that Igho Sanomi and his company have not found any success in cohabiting with the current administration, Sanomi says it was not his priority.
“You need to understand that this is the second crude oil lifting contract in the current administration. We made a bid for the first round in 2015 and we were successful. We were not particularly aggressive about this one. Besides, as a company we also had the unresolved issue of the crude oil swap accounts, which we needed to resolve and have done so quite well. So we got to a point where we said let us take a minute and re-evaluate our strategy as a company. Sure, we’ve taken a beating. The fluctuation in oil prices had a major impact because we had taken a number of positions that didn’t quite pan out as we hoped, but we’re taking steps now to restructure our business,” he says.
In the future, Taleveras is looking to reduce its dependence on government contracts. In order to separate his business from politics, Sanomi has reduced Taleveras’ government tenders/oil lifting participation to nil, for now. “We are reorganizing our affairs so that we can continue to prosper without the government business.”
“We are very keen on our power business and we are exploring a number of ideas on how we can approach it. But what we are doing now is to look at the entire strategy for power, and discussions are still ongoing to decide what approach to take. We’re also looking at opportunities in alternative energy sources, and we are in advanced discussions with one of the biggest players in this space. But I can’t say so much because discussions are still going and they are bound by confidentiality,” Sanomi says.
About on-going disputes and well publicized settlements, Sanomi goes on to say: “Some of these disputes have been blown out of proportion. On a shipping operation so much goes on. At the end of the day, every trading company has disputed costs and undisputed costs regarding quality and other things. One of the key things for us was that we discovered that these disputed issues were slowing down our business. Every trading company goes through this.” Sanomi says.
For the next few months, Taleveras is focusing on re-organizing its business, cutting costs and settling pending litigations to avoid distractions in its core business. To this end, Sanomi is making some tough decisions. He has re-focused on commencing exploration activity on oil blocks Taleveras owns in Cote D’Ivoire. Taleveras plans to invest well over 100 Million USD within the next two years in its upstream business in Africa.
While Sanomi is still Chairman of Taleveras and reports to work on most days, he does not run the day-to-day operations of the business. He is devoting more time to philanthropy. In 2011 Sanomi founded the Dickens Sanomi Foundation (DSF) in honor of his father. The foundation supports programmes in education and health across Nigeria. Apart from school rehabilitation programmes, Sanomi also supports autism awareness initiatives and donates to humanitarian disasters across Nigeria and elsewhere in Africa, spending millions of dollars of his own money every year supporting programmes.
Sanomi, a Roman Catholic, was awarded a Papal medal of His Holiness Pope Francis in 2014 for his ongoing dedication to the Catholic Church and for his support of the Vatican’s mission in Nigeria. Sanomi has also donated substantially to cancer research through the Bobby Moore Fund for Cancer Research in UK to help fund prostate cancer research, a gesture that earned Sanomi the Martin Luther King Legacy Award for Philanthropy and International Service in 2015. Sanomi was appointed Honorary Chair for the 25th anniversary of the International Salute to Dr. Martin Luther King Jr, which took place in Washington, DC in 2016.
Most recently Sanomi has funded the inaugural ‘Touch a Life Today’ campaign launched by the Global Initiative for Peace, Love and Care (GIPLC), across three Nigerian states, which aims to reach 1000 vulnerable patients who cannot pay their medical bills. The campaign ends on 17th May 2017.
For now, Sanomi is working to restructure his businesses, together with his trading arm, led by CEO Martial Beauvallon, a former oil executive who worked with Total for 35 years, and William Brock Tuppeny, a seasoned upstream executive formerly with Petrofac; he remains committed to doing business in Africa.
“I think the future of Africa is bright, and Taleveras will always look within the continent in terms of capital investments in the downstream, upstream, power and telecommunications. We are looking to diversify a bit to other sectors, but in terms of our core business which is oil and gas, we are here for the long haul; we are here to do business, we are here to do new partnerships mainly private-sector driven, we are here to expand our outreach by acquiring the necessary facilities and assets that will help us accomplish this more professionally and more effectively.”